Can I Deduct The Cost Of Tax Preparation Software Or E-filing Fees?
Posted by benny in FreeWare on November 27th, 2009 | 5 responses
I’m self-employed; does that make any difference when it comes to deducting the cost of Tax Preparation software, or the cost of e-filing fees? Rather then using Line 21 of Schedule A, can I deduct the cost on Schedule C? If yes, what line do I use?
Thank you!!!
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5 Responses to “Can I Deduct The Cost Of Tax Preparation Software Or E-filing Fees?”
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The cost of preparing and computing your taxable income are deductible. You may deduct the reasonable and necessary costs of operating your business, which includes professional fees, legal, and accounting, etc. You can call it anything that seems accurate; e.g., tax prep, legal and accounting, dues and publications, lots of things would work. Only the portion that is attributable to the business is deductible on the Schedule C, the rest needs to be included on the Schedule A as a miscellaneous deduction (and is subject to a 2% AGI floor.) The trick is to determine which portion pertains to the business. An argument could be made that if it weren’t for the complexities of reporting business income and expense, all of the related costs are attributable to the business. (That’s not the IRS’s opinion, though.)
Information from TurboTax itself says that that the cost of tax preparation (plus other misc deduction) need to exceed 2% of the adjusted gross income. Otherwise they are not deductible.
http://turbotax.intuit.com/tax-tools/maximize_tax_deductions/article
This is confirmed by the IRS as well, here:
http://www.irs.gov/publications/p529/ar02.html#d0e240
maybe.
IRS will argue that your use of these for business is incidental to your use for personal purposes and thus they go on line 22, schedule A [if you itemize]
The cost you paid this year is deductible in 2008. The cost you paid last year is deductible in 2007.
Put the fees on the schedule C if you make enough to believe your taxes couldn’t have been done without professional help. Otherwise they go on schedule A.
I deduct the cost of my Turbo Tax because I had to purchase the Premier package to track rental expenses.If you can show a business need for the software, the software should help you decide which line to use.